Revenue from operations = 4,00,000, Average Inventory = 55,000 Gross Profit Ratio = 10%. Calculate inventory turnover ratio-
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 6.55 Times
Inventory turnover ratio = cost of revenue from operations ÷ average inventory. The cost of revenue is found by taking the gross profit out of revenue.
Gross profit = 10% of Rs. 4,00,000 = Rs. 40,000
Cost of revenue from operations = Rs. 4,00,000 − Rs. 40,000 = Rs. 3,60,000
Inventory turnover ratio = Rs. 3,60,000 ÷ Rs. 55,000 = 6.55 times
Dividing revenue (Rs. 4,00,000) by average inventory would give 7.27 times; the ratio uses cost, not revenue.
NCERT (2026-27 edition):
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